The riegle-neal act and local banking market concentration

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 greatly transformed the American banking system by allowing the widespread establishment of interstate bank branching networks. This paper examines possible effects on local banking market concentration that resulted from the provision in the Riegle-Neal Act that allowed states to opt-in to the establishment of de novo interstate branches. Regression analysis using data from more than seven hundred cities does not provide any evidence that allowing the establishment of de novo interstate branches caused increases in local banking market concentration. These results may help alleviate some concerns that passage of the Financial Services Regulatory Relief Act currently pending in Congress will result in lessened competition in local banking markets. The author would like to thank discussant Janice Breuer and other participants of the International Atlantic Economic Conference, held in Quebec City from October 16–19, 2003 for helpful comments and suggestions. The author would also like to thank Trevor Lyon for his valuable research assistance.